February 13, 2012 / 6:40 PM / 9 years ago

UPDATE 1-USDA sees US corn stocks double next year

* USDA baseline projects corn area largest since 1944
    * Baseline report to be followed by outlook forum
    * Analysts had expected a large corn area
    * No market reaction unlike last year

    By Sam Nelson	
    Feb 13 (Reuters) - A U.S. government report on Monday
showed farmers in the United States will plant the largest area
with corn this spring since World War Two, which could double
the razer-thin stocks of this year and help defray costs to
consumers and food companies.	
      The U.S. Department of Agriculture's baseline projections
-- the first of a series of estimates that will help shape
prices across the globe -- pegged corn acres at 94 million, the
most since 1944 and near trade expectations for 94.2 million.	
    The projections, based on data in November and which will be
updated at the USDA's Outlook conference on Feb 23 and 24 with
more current statistics, put corn ending stocks next summer at
1.6 billion bushels -- double the 801 million this year.	
     Corn stocks, the smallest in 16 years this year, will swell
to the largest in two years in the 2012/13 season (Sept/Aug).	
    A Reuters poll of 24 analysts' had pegged the area at 94.2
    USDA's forecast corn area fell short of the 95.475 million
planted in 1944, 68 years ago.	
    USDA forecast the amount of corn for feed at 5.225 billion
bushels, up from 4.6 billion this year, corn for ethanol was
trimmed to 4.950 billion from 5.0 billion and exports were
increased to 1.875 billion bushels from 1.7 billion this year.	
    The government lowered its average farm corn price to $5.00
per bushel for next year compared with $6.20 this season.	
    USDA cited a record 14.235 billion bushel corn crop, above
the previous record 13.1 billion and pegged the yield per acre
at 164.0 bushels, above last year's 147.2 bushels per acre.   
USDA forecast soybean plantings at 74.0 million and a crop of
3.215 billion bushels, the third largest on record. The Reuters
poll pegged soy area at 75.3 million.	
    The baseline report had little impact on grain futures at
the Chicago Board of Trade.	
    Last year, the baseline projections took many grain experts
by surprise when active selling tumbled corn futures at
the Chicago Board of Trade by 16 cents, or 2.3 percent, over two
days, and by 50 cents, or 3.5 percent, for soybeans.	
    The influx of a new breed of deep-pocketed investors over
the past few years who consider grains an asset just like
company shares or bonds have upped the ante, fueling wild swings
in prices with the ebb and flow of their money.	
    An analysis of USDA's annual baseline projections for corn
acreage over the past decade showed the forecasts topping the
department's estimates from the Outlook conference just once,
while coming in lower six times.	
    For soybeans, the baseline projections topped the Outlook
estimates three times and came in below five times.	
    Last year, the baseline projections for corn and soybean
acres matched those from the Outlook's at 92 million acres and
78 million acres, respectively.	
    The USDA's acreage estimates are updated more definitively
in its March 30 planting intentions report, which is based on
surveys done with farmers.	
    Analysts said high profitability of growing crops this year
is going to draw more land out of the conservation reserve
program, a government scheme that pays farmers not to plant
crops in return for a cash payment.	
    "Another 1.47 million acres will be available from the CRP
but a lot of that was in Montana so that will probably be
planted to spring wheat," said Tim Emslie, research director for
Country Hedging, a Minnesota-based brokerage.	
    Currently, about 30 million acres are enrolled in the CRP,
and contracts on an estimated 6.5 million acres will expire
Sept. 30, too late for spring planting but in time for fall
seedings of the next season's winter wheat crop.	
    There also will be a big bump in seeded land this year from
areas that weren't planted last year because of harsh weather.	
    USDA projected plantings of the eight major crops at 251.2
million acres compared with 249.3 million last year.	
    Wheat plantings were pegged at 56.5 million, up from 54.4
million last year.	
    The USDA last summer said 7 million acres of corn, soybeans
and spring wheat were not planted because of a cold and wet
spring. All of that land is expected to be put back into
production this year. 	
    A big a jump in corn output, assuming exports, feed usage
and use for ethanol remains stable, would replenish U.S. corn
stocks that are projected to end this marketing year at a 16
year low. This rapid buildup in corn stocks could add
significant pressure on corn prices.	
    The U.S. corn supply has been drawn down even further than
expected earlier in the early because of a drought in Argentina,
the world's second-largest corn exporter after the United
    Corn prices are currently 20 percent below the record high
of $7.99-3/4 hit last summer and 10 percent below a year ago.
However, the price of corn remains 40 percent above the peak in
2009, a year of record yields and production.	
    Therefore, the current price is being viewed by some at a
lofty level considering the potential rush of acreage and
possible record production this year.	
    Despite the surprise impact of the baseline projections on
the market last year, some traders are convinced the data will
be uneventful this time around.	
    "I have no interest in the baseline numbers. They have
little value for 2012 acreage forecasts and very little
accuracy. I am much more interested in USDA's personal thoughts
at the Feb. 23-24 outlook conference," said Rich Nelson,
director of research at advisory firm Allendale Inc.	
    But numbers that are dramatic could trigger volatility in
CBOT grains futures, especially with large speculators,
including hedge fund, being net long corn futures and options by
125,564 contracts as of Jan. 31, according to data from the
Commodity Futures Trading Commission.	
    "I don't see these numbers as market sensitive but we will
look at them longer term. It will be interesting to see what
USDA is projecting for the next five to 10 years for usage,
production, yields and prices," said Marty Foreman, feedgrains
analyst for Doane Advisory Services, St. Louis, Missouri.
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